Development of the Rockwall County Budget
Development of a budget for any household, business, or governmental entity is more than a casual affair. Most people do a pretty good job of establishing their own personal and household budgets, but once it gets beyond that level, the tendency is to not really worry about how spending is developed for their city, county, state, or even national organizations.
One of the first requirements in creating any budget is calculating the amount of money you have to spend. Last year here in the County during the development of the 5 Year Strategic Plan, a group of individuals with talent in financial matters and mathematical modeling developed a basic forecasting model for the County. Using this model and the projections from our Centralized Appraisal District, it is now possible to project out 5 years into the future the revenue the County can expect to receive to run their operations and pay their debt service and also look at various taxing rates and operational cost variables.
County revenue is composed of two major parts. About 87% of the County money comes from Property Tax assessed on individual homes and businesses located in the County. The remainder comes from Fees, Fines, Interest, and Grants that are generated by either payments assessed in the courts or clerks offices or awarded by some outside agency for a specific purpose such as clean air program, etc.
The Property Tax revenue the County is projected to receive this fiscal year, which ends on September 30, is $26,452,845. This includes taxes levied this year and collection of past due taxes from previous years. The Centralized Appraisal District is projecting for the second year in a row a .5% growth in net taxable income for next year. Using the forecasting model, this translates to a revenue for the County of $26,746,204; a growth of about $284,000.
One of the key factors for validity of the forecasting is the accuracy of the increase or decrease in the net taxable value by the Centralized Appraisal District. They are pretty good! In 2009, the Appraisal District forecast was +2%; it actually increased 2.5%. In 2010 the forecast was for 0% growth, it actually was a negative .2%. Last year the forecast was for 0% growth; it was 0% growth. And this year the forecast was for .5% growth and it will be right on the money at .5% growth.
Fees, Fines, Interest Earned on investments, and Grants make up the remainder of monies which will be available to the County for each year’s operation. This year, for example, Grants and reimbursements equaled about $958,000; Fees were $1,761,000; Fines were $1,100,000, and Interest was $110,000; for a total of about $3,930,000. Next year the projection is for about $3,900,000 to be received by the County.
Thus when you add up the projections for the Property Tax revenue and the Fees, Fines, Interest, and Grants revenue for next fiscal year, October 1, 2012-September 30, 2013, the total amount expected [revenue] is $30,646,204. From this revenue provided to the County, the Debt must be serviced and the Operations of the County must be sustained.
$5,740,884 of the revenue must be used to pay the principal and interest on the debt of the County. This debt includes payments for the Library, some Tax Notes issued in 2007, the new Courthouse, the County Services Building, and the Road Improvements you see on-going throughout the County.
On the Operations side, this year the County budgeted to spend $25,325,137. This year’s budget was a balanced budget and did not require any increase in taxes to our citizens.
Now comes the tough and creative skill of developing a budget for this coming year. The revenue is pretty much set at $30,646,204. The total amount of monies needed for operations without any increase in cost is $25,325,137. The money needed for debt service is $5,743,520. Therefore a total of $31,068,657 is needed. But the revenue is only $30,646,204; a shortfall of $422,453.
Add to this shortfall the fact the County must absorb the costs of an additional two Justice of the Peace (JP’s), their staff, and two additional Constables because of a State mandate that says that every county over a population of 50,000 must have one JP and one Constable per precinct. This cost, with the current organizational structure, adds about $600,000 to the budget this coming year.
And then most departments, whether in the County, a Corporation, the State, or at the National level almost always think they need to expand to more effectively achieve their objectives. This, of course, adds additional pressure to establishing a balanced budget without raising taxes to generate more revenue.
A good question to ask is “What is the forecast for growth and what will the budget requirements look like in the future?”
The current forecast from the Centralized Appraisal District calls for a 1% increase in Rockwall County Net Taxable value in FY 2014; 2% in FY 2015 and FY 2016 and 3% in FY 2017.
There also will be a demand for additional Debt Service payments as more roads continue to be funded from the $100 million Bond program that the voters approved in 2008. For example, with the current road building schedule, Debt Service payments will be going up an additional $1,900,000 within the next three years.
There are things which can be done for short term help with the budget for this year. But as the Debt Service continues to rise and as the normal pressures of growth continues, it is clear that either a significant increase in Net Taxable growth must happen fairly quickly or the Commissioners Court will be debating a tax rate increase to fund on-going and Debt Service obligations. And that is not what anyone that I know wants.
Jerry Hogan is the County Judge of Rockwall County Texas. He can be reached at email@example.com or 214-394-4033.